Another Day, Another Record-Low Junk-Bond Avg Yield: 5.084%

By Michael Aneiro

Until a few months ago, the idea that the average yield across the junk-bond market could fall below 5% would have been considered completely preposterous. Now, it’s something that could conceivably happen by the end of this week if current trends persist.

Not content with setting new all-time records three times last week, junk bonds took last Friday’s risk-on rally as an opportunity to reach a new record-low average yield of 5.084%, beating the previous record 5.124% set Thursday, which beat the previous record of 5.178% set a day earlier, etc. Again this is all a part of the high-yield market’s ongoing pattern of setting new all-time records on a daily basis, thanks to the Fed’s zero-interest rate policy driving investors into the highest yielding investments around (with an assist from the Bank of Japan’s latest aggressive easing efforts).

The average bond price hit a new all-time high 106.93 cents on the dollar, up from the previous all-time high 106.72 seen late last week, all per a benchmark Bank of America Merrill Lynch index. And the market’s average spread over Treasuries, which was stuck for quite a while just north of 475 basis points, has completely blown through that level of resistance over the past couple of weeks, dropping to 433 basis points at last check.

This high-yield market has now returned 5.43% in 2013 to date. It started the year yielding just over 6% on average.

So far on Monday the market looks to be treading water. The iShares iBoxx $ High Yield Corporate Bond Fund (HYG) is recently up 0.3% to $95.95, and the SPDR Barclays Capital High Yield Bond ETF (JNK) is up 0.24% to $41.74.